TaxTMI 
TaxTMI 
1991 (5) TMI 138
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....achines were given the benefit of the concessional rate of import duty applicable under Heading 84.66 of the First Schedule to the Customs Tariff Act, 1975. The application for registration of the subsequent import of 1000 tonnes of H.R. Coils for testing in terms of the performance guarantee embodied in the contract was rejected on the ground that the goods are not covered within the scope of Heading 84.66 as they are not raw materials required for the manufacture of capital goods specified under Clauses A, B, or C of sub-heading No. 1 of Heading 84.66 nor are they raw materials essential for the maintenance of the plant. 2. We have heard Shri D.A. Dave, the learned Counsel and Shri M.K. Sohal, the learned DR. 3. The contract between the appellants and the sellers was referred to and our attention was drawn in particular to certain clauses of the "agreement for the design, manufacture, delivery and supervision of erection, start-up, commissioning and testing of one complete unit of Sendzimir Cold Rolling Mill" viz. articles 1 & 5. The learned Counsel also drew our attention to the clauses in the Schedule to the contract relating to demonstration of performance guarantee. He ....
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.... The raw materials imported for testing have been recognised by the Government of India as required for initial setting up of the Unit; and (v) The rule of beneficial construction should be applied in favour of the appellants to grant them the benefit of concessional rate of duty under Heading 84.66. 5. The following citations were relied on by the appellants : (i) 1983 (12) E.L.T. 829 (ii) 1985 (21) E.L.T. 273 (iii) 1985 (21) E.L.T. 873 (iv) 1985 (22) E.L.T. 68 (v) 1988 (38) E.L.T. 568 (vi) 1989 (44) E.L.T. 794 (SC) (vii) 1989 (44) E.L.T. 525 (viii) Order No. 1064 & 1065/83-B dated 17-11-1983 HAL (ix) Order No. 347/90-B2 dated 25-7-1990 - WEBEL Telecommunication Industries Ltd. 6. From a reading of the above rulings, he prays that a harmonised and practical interpretation be given to Heading 84.66 in the light of the contract and the import licence granted to the appellants. 7. In response the learned DR fairly concedes that there is no dispute regarding the materials being required for initial setting up o....
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....s, B) Instruments, apparatus and appliances, (C) Control gear and transmission equipment (a) 40% (D) Auxiliary equipment, as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified : (1) industial plant (2) irrigation project (3) power project (4) mining project (5) project for the exploration for oil or other minerals, and (6) such other projects as the Central Government may, having regard to the economic development of the country, notify in the official gazette in this behalf." 11. A reading of the terms and conditions of the contract between the appellants and the foreign sellers makes it evident that the import of the raw material is for the initial setting up of the Unit because the unit cannot commence production unless and until testing is carried out with the imported raw material in terms of the performance guarantee which is an integral part of the contract. The relevant extracts from t....
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.... scope of the contract and not specifically excluded by the contract from the materials and services which the contractor is obliged to furnish under the contract or implied from tender specification, drawings, and schedules hereto annexed or incidental thereto. 17.1  The Purchaser shall have the right of inspecting and testing the contract work or any part thereof at any time during the manufacture, and the contractor on demand from the Purchaser shall carry out such tests in an appropriate manner in the presence of and free of charge to the Purchaser. Should the contractor himself not be in a position to carry out the tests, he shall, on the Purchaser's demand, prepare specimens or samples and send them at his own cost, to such testing stations as the Purchaser may specify and the cost for the test so effected shall be to the Contractor's account. Should a part of the plant be manufactured not on the Contractor's own premises but on other premises, the Contractor shall likewise obtain permission for the Purchaser to inspect and test the work as if the said plant were being manufactured on the Contractor's premises. The inspection, examination, or testing carried out by th....
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....ontractor. Article 28.6 On satisfactory completion of the performance test of the plant, the Purchaser will normally issue a provisional acceptance certificate, provided that the Contractor undertakes to rectify defects, if any, which do not influence normal operation but which are nevertheless present in the plant and which are indicated in writing by the Purchaser, at the earliest possible moment. Such certificate, however, shall be deemed to be on account and shall in no way release the Contractor from his liabilities and responsibilities in respect of the contract plant as a whole. In special circumstances and at the Purchaser's sole discretion, provisional acceptance certificates may be issued for a part of the plant. Article 29.1 The final acceptance certificate of the contract plant as a whole will not be issued until proof is rendered of satisfactory integrated operation, that is to say, that the contract plant is capable of giving the guaranteed performance and output. 29.1.1 Until such time as the supply of drawings, documents and information required as per Article 12 are completed, the Purchaser will not issue the final acceptance certificate. 12. ....